The German government is supporting calls from the property sector to adjust ESG regulations. Katharina Beck, financial policy spokesperson for the Green Party parliamentary group, points to ongoing talks with the EU Commission regarding a reform of the recently introduced Green Asset Ratio (GAR).

Beck said at a recent German Property Federation (ZIA) conference in Berlin that the GAR was not well crafted, and it remains questionable whether it can function on the market. Florian Toncar (FDP), State Secretary for Finance, also criticised the GAR for making SME financing more expensive, saying that banks will be incentivised to finance larger companies.

Banks will have to publish a GAR for their lending businesses for the first time on 30 September – as part of a decarbonisation pathway up to 2030. ZIA Vice President Jochen Schenk pointed out that the consequences of the new rules have yet to be seen. If equity surcharges were to become necessary in the event of negative deviations, the continued financing of property portfolios – both in the commercial and residential sectors – would become difficult to say the least. Schenk warned that the current ESG regulation threatens to encourage the wrong allocation strategies of private investment funds. „They are flowing into what is already green, not into what should become green“, he explained. At the same time, the implementation effort, and above all the legal consequences, of the new Corporate Sustainability Reporting Directive (CSRD), are underestimated.

Toncar did however promise that there would be a 1:1 implementation of the EU requirements – without special national rules or so-called gold plating. The FDP politician conceded that the CSRD will once again significantly expand the administrative tasks in the area of sustainability reporting. This cannot be avoided, but the coalition is trying to minimise bureaucracy in the implementation process. A draft law was published in March, and is currently being worked on by the various ministries. One of the issues still being discussed is who should be responsible for auditing the sustainability reports. According to EU requirements, the CSRD should be transposed into national law by 6 July.

According to Toncar, the Ministry of Finance also wants in future to categorise companies that present realistic and concrete transition plans as „green“ under the taxonomy. According to Schenk, ZIA has already proposed to the EU Commission that properties that achieve a 50% reduction in their emissions be recognised as taxonomy-compliant for ten years.